12 Real Estate Investment Calculations to Know

Here are 12 real estate investment calculations to know before investing
(Beginner investors, this one is for you)

1. 50% Rule
2. 70% Rule
3. Break-Even Ratio
4. Rent-to-Cost Ratio
5. Cash on Cash Return
6. Return on Equity (ROE)
7. Price Per Square Foot (PSF)
8. Net Operating Income (NOI)
9. Internal Rate of Return (IRR)
10. Gross Rental Multiplier (GRM)
11. Capitalization Rate (Cap Rate)
12. Debt Service Coverage Ratio (DSCR)

Here is how to calculate them:

1. Total Expenses = 50% x Gross Income
2. Max Purchase Price = 70% of After Repaired Value – Rehab
3. Break-Even Ratio = (Operating Expenses + Debt Service) / Gross Income
4. Rent to Cost Ratio = Monthly Rent / Total Property Cost
5. Cash on Cash Return = Cash Flow Before Taxes / Cash Invested
6. ROE = Annual Return / Total Equity
7. NOI = Operating Income – Operating Expenses
8. Price Per Square Foot = (Sales Price or Rent Price) / Total Square Footage
9. While the concept is relatively simple, the math behind it is not.
10. GRM = Total Property Cost / Gross Annual Rent
11. Cap Rate = NOI / Purchase Price
12. DSCR = Net Operating Income / Debt Service

Any questions?